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Uzone.id—The China-based tech giant Alibaba Group Holding reported that it would merge its domestic and overseas e-commerce operations into one unit.
The company reported this announcement on November 21st, 2024, and it pointed out Jiang Fan, the tech giant’s 39-year-old heir-apparent, as the CEO.
This merger will impact all of Alibaba’s domestic and international e-commerce units, officially named the Alibaba E-commerce Business Group. It will integrate the Taobao and Tmall Group, Alibaba International Digital Commerce, 1688 Marketplace, Idle Fish, and other e-commerce operations.
Alibaba Group CEO Eddie Wu, stated in a letter to employees that this is the new era of the e-commerce industry.
“The e-commerce industry in China and around the world is entering a new era, and the global supply chain capabilities, fulfillment capabilities, and consumer service capabilities will determine the future competitive landscape,” said Wu, quoted from Finance Asia.
This merger eliminates redundancies, cuts costs, and creates a more cohesive experience for shoppers and sellers alike. This merger is also part of Wu’s plan to divide its operations into six business divisions.
Wu also stated that this merger would boost competitiveness and efficiency in the e-commerce industry.
This may sound smart and bold, but merging two mega-platforms isn’t as simple as combining two small businesses. It comes with some significant challenges.
An analyst quoted from South Morning China Post said that the move reflects Alibaba’s determination to seek new growth amid fierce competition in an e-commerce industry struggling with slower growth.
Zhang Yi, founder and chief analyst at market consultancy iiMedia, said, “Judging from the integration, Alibaba’s determination is very big.”
Zhang believes merging Alibaba’s domestic and overseas units aligns well with the global Chinese manufacturing expansion trend, making it a smart move for the company, especially when it loses its edge in the mainland market.
According to Statista, the global e-commerce market is worth $5.7 trillion, and Alibaba’s move could strengthen its grip by merging Tmall and Taobao, Alibaba.
They aim to cut costs. Running two platforms means doubling the work for tech infrastructure, platform, marketing, customer support, etc. Merging all of the units could save a lot of time, money, effort, and human resources.
Another thing that Alibaba tries to achieve through this merger is to boost global competitiveness. Global competitors like Amazon and Shein are aggressively expanding these days, and this merger could give Alibaba the new ‘weapon’ it needs to stay relevant.
But still, there’s always the risky part. Like any ambitious plan, this merger isn’t without risks. Merging overseas and domestic e-commerce units has risky points, such as operational challenges, crisis identity for the brand, and regulatory scrutiny.
In the crisis of brand identity, for example, Tmall and Taobao have distinct vibes. Alibaba should choose whether to use one of its old identities as the main one or combine both into the new one.
Governments worldwide are also monitoring big tech, especially those from China. Any sign of monopoly behavior could trigger antitrust investigations. Big mergers like this often face challenges, especially in blending company cultures and following regulations.
However, when we examine data on Alibaba’s e-commerce units, we might understand whether this merger is a genius move or a risky bet.
Based on the market share number, Alibaba is still dominant in its own regional market, with 47.1% of China’s e-commerce market. However, its share is far smaller globally, with Amazon leading the pack. Still, Alibaba has huge users, especially on Taobao and AliExpress.
In the Q3 2024 report, Taobao had almost 930 million monthly active users, and Tmall had 180 million active users. Combining both platforms, Alibaba has more than 1 billion active users annually.
Regarding revenue growth, Reuters reported that Alibaba Group increased its revenue by 5% year over year in the third quarter of 2024 to US$36.67 billion, which is slightly lower than analysts estimated. If the process is doing well, this merger might be the way to escalate its momentum.
So, is Alibaba’s e-commerce merger a brilliant strategy or a risky move? For now, it could go both ways. If Alibaba executes this merger well without any big mistakes, it has the potential to solidify its position as a global powerhouse in e-commerce. But if it stumbles, the company risks alienating loyal customers and inviting regulatory trouble.
